I always keep a close eye on the corporate calendar for the companies on my watchlist, and with good reason. That’s because investors sometimes overlook the finer details in positive pre-close trading updates, so when the results announcement is made we are not only guaranteed good newsflow, but importantly it’s not being priced into the valuation.
With this thought in mind, there is a glaring valuation anomaly on offer in the shares of cash-rich insurance sector investment company BP Marsh & Partners (BPM:230p). It's a business I know well, having initiated coverage over five years ago at 88p ('Hyper value small-cap buy', 22 Jan 2012), and last rated the shares a buy at 230p ('Investment company watch', 31 Jul 2017). A pre-close trading update ahead of the half-year results on Tuesday 17 October suggests my bullish stance is likely to be vindicated for a number of reasons, the most obvious of which is that the company’s net asset value (NAV) per share is set to rise sharply again.
Having sold off its stake in Besso Insurance, a top 20 independent Lloyd's broking group, a deal I commented on at the time ('Four undervalued growth plays', 24 Apr 2017), BP Marsh has been shrewdly investing the £22m cash raised. The company invested £7.3m to increase its stake from 43.1 per cent to 60.87 per cent in LEBC, an independent financial advisory firm. This effectively values LEBC’s entire equity at £40m, or a third more than the implied value in BP Marsh’s last set of accounts and suggests a valuation of 20 times LEBC’s historic trading profit, a rating that’s in line with that of listed rival Mattioli Woods (MTW).